Published in the May 2015 Chamber Review - the
Concord (NH) Chamber of Commerce's monthly
newsletter
It is that time of the year again when companies take on college
students as summer interns or "volunteers." There is no
doubt that internships can be invaluable to college students in
terms of the subject matter and practical experience of working in
a real world environment that may lead to a job offer. However,
many companies mistakenly believe that they do not have to pay
wages to these interns. In fact, there is no "internship"
exemption from federal wage and hour law. Most of the time interns
will be considered non-exempt employees and therefore must be paid
at least minimum wage for all hours worked, including overtime for
any time worked over 40 hours in a work week pursuant to the Fair
Labor Standards Act (FLSA).
There are limited circumstances when an individual in an
internship or training program would not be considered an employee
and thereby not be compensated for time spent performing services
for the company. Interns who receive training for their own benefit
from a company must meet the following six criteria in order to
meet this exclusion:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
It may appear fairly easy to meet the six criteria, but in fact
many well-known companies have been recently alleged to have
violated the FLSA "training" rule. Failing to meet the
"training" requirements can result in an action for
unpaid wages and overtime, attorney's fees, employer liability
for unpaid taxes, unemployment contribution back payment, and
worker's compensation claims.
To ensure that compliance is met, focus on understanding and
implementing the internship as an educational program. For example,
provide generalized training that will not result in an immediate
advantage to the business. Keep track of the substance of the
training, length of training and who conducted the training and,
similarly, keep track of mentoring. If interns are following a true
educational program then it only follows that they will need close
supervision. Supervisors should keep track of the type and
frequency of that supervision. Unpaid interns should not be
performing the same tasks as current employees nor displacing
current employees. The company should not receive an
"immediate advantage" from the activities of the unpaid
intern. For example, if the company charges a customer for work
performed by the unpaid intern, then this arrangement could tip the
scales in the direction of the unpaid intern being considered an
employee. In terms of the nuts and bolts of the internship,
establish a definite time period for the internship to begin and
end, confirm in writing that no job is promised at the end and that
it will be unpaid. Finally, unpaid internships arranged through
educational institutions and that are appropriately documented as
described, are less likely to be found to be in violation.
Remember that the USDOL will analyze each internship on a
case-by-case basis and if you have any hesitation about whether the
intern meets the criteria the simple answer is to pay him or
her.
Beth Deragon is an attorney in the Employment Law Practice and
Litigation Group at the law firm of McLane, Graf, Raulerson &
Middleton.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.